Truth and myth in entrepreneurship
By Tania Ngima
| December 15th 2015
This past week, I was speaking at the World Trade Organisation Youth Discourse forum. It gave me a unique opportunity to delve into a topic that is close to my heart, the participation of Micro, Small and Medium Enterprises (MSMEs) in local and global trade.
There is a reason why this topic is so relevant especially in the 21st Century. Consider these Kenyan statistics.
It is estimated that over 65 per cent of Kenyan youth are not productively employed - meaning they do not have a regular and stable source of income that they can rely on from one month to the next.
The informal sector constitutes 98 per cent of all businesses in the country (in number, not in value). It contributes employment of 30 per cent with a growth rate of 12-14 per cent but only 3 per cent of the country’s GDP. These numbers are echoed to a large extent across the African continent.
There is no doubt then, that if there were concerted efforts towards strengthening this sector, it could easily be the answer to the employment problems we’re experiencing, especially among the youth.
The audience I was interacting with at the forum consisted of roughly 80 per cent youth; who are either running or hoping to run their own enterprises in the near future.
And in response to a question I’ve been grappling with regarding small enterprise owners not wanting to grow their businesses past the point where they live from hand to mouth, the crowd reaffirmed that they do want to build legacies that outlive them.
The crux of the matter, though, is that most of us do not know the ins and outs of building sustainable businesses or why some businesses flourish while others stagnate or even worse, fail within a couple of years, confirming the dreaded statistics cited on business failure. And that is not entirely our fault. While academia focuses on everything from History, Mathematics,
Religion and everything in between, there has been no conscious effort to make the basics of building businesses a part of our education system. In fact, it is only in the last couple of years that universities have started focusing on entrepreneurship.
As such, most of us rely on learning from the people around us who seem to have got it right and thankfully in this age of technology, using the internet - which is chock-full of insights from all over the world. However, the insights and information on developing countries, specifically in Africa, are still too low to provide any practical tool-kit for our use.
We end up looking at highly successful models like Amazon, Airbnb and Silicon Valley that operate in a radically different environment and get disappointed when they don’t work when we reproduce them here at home.
And while there is much to learn from these businesses - I keep reminding the youth that they must find a way to localise a solution to their particular environment - we deal with such a different set of constraints that to do any different would be unlikely to yield the same results.
I am reading a highly recommended book on SME governance, Traversing the Avalanche, which incorporates empirical evidence on the African continent to deconstruct business successes and failures. Therein I found a gem that supports a trend that I have been observing within micro enterprises.
It revolves around the difference between craft and enterprise. Craft is defined as a skill (tailoring, accounting) that an individual is highly adept at, and which they decide to monetise by offering it as a service to paying customers.
However, for most people who decide to convert their competency into a business without having been exposed to the intricacies of running an enterprise, the frustration builds up quite fast. The reality of most small businesses, often solopreneurs, is that as they begin, they cannot afford to hire staff to carry out the different organisational tasks.
So they end up getting caught in doing everything from pricing their products, keeping track of their sales and expenditure, marketing, administration, following up on debts; the list is endless. Soon, something they enjoyed doing turns into twenty different elements, half of which do not interest them or they are not proficient at.
However, in the book it is cited that those entrepreneurs who revert back to their technical competencies find a renewed energy and excitement and would rather that someone else handles those tasks that do not appeal to them.
To a large extent, MSME participation in global trade is something of a misnomer, less than 10 per cent of the existing MSMEs are ready to face local competition, leave alone global rivalry.
Though we have a long way to go in strengthening these enterprises, therein lies a great opportunity for legislation and academia.
Countries like Singapore that we like to benchmark against have made significant strides in enhancing the policy and business environment to make it more conducive for small enterprises to flourish, and we too can if we start to focus on easing the true pain-points for aspiring and existing entrepreneurs.
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